Jul 01, 2020 06:00:00

Apple and Facebook look like a hostile relationship, but in fact their interests are in agreement

With

iOS 14 , scheduled for release in the fall of 2020, Apple will make a specification change that turns the advertising identifier IDFA into something virtually useless. This is expected to be a major blow to Facebook and advertisers who make money from targeted advertising. In this way, Apple and Facebook have a very different strategic approach and are often thought to be in a hostile relationship, but analysts Ben Thompson points out that the interests have so far been in agreement.

Apple and Facebook – Stratechery by Ben Thompson
https://stratechery.com/2020/apple-and-facebook/

Technology companies such as Apple, Google, Microsoft, Amazon, and Facebook each have their own competitive advantage and strengths. In the case of Google and Amazon, where “infrastructure” and “data” are strengths that are easy to understand, Apple has faced the issue of business sustainability for years after the success of the iPhone. However, Apple now has a competitive advantage in terms of 'good chip' and 'user experience,' Thompson said.

Meanwhile, Facebook makes money by advertising. Both seem to be in opposite directions, in that Apple sells the product and minimizes data collection to improve the user experience, while Facebook maximizes data collection. .. However, the two seemed to be hostile, and the interests were agreed in a very complicated way.

First of all, when the iPhone was introduced, Facebook was originally in the direction of not developing apps for iOS, and instead, 'web apps that run on all platforms' were being developed. However, due to the explosive popularity of iPhone, the demand for mobile apps increased, so Facebook decided to start developing mobile apps. For this reason, Facebook as a mobile application is lagging behind, and the code was rewritten even after the application was actually published.

However, at the turning point of developing mobile apps for iOS, Facebook has seized a new business opportunity called app install ads . App install ads have reached 8-10 times more reach than traditional mobile ads, making them an especially important channel for the mobile game industry.

Then, using Facebook advertising, which has become a hot topic in the mobile game industry, many companies, mainly consumer e-commerce companies, will succeed in their business. Facebook's targeting is very powerful, and

direct-response ads , especially those that get a direct buy-in response from ads, have created a new Internet-specific business.

On the other hand, Apple was initially struggling to make a profit from the App Store, but the expectation of developers increased due to the success of Facebook's app installation advertisement. Earnings surged as more apps came out of the App Store.

Thompson says that as more companies make money, especially Facebook, Facebook gains 'anti-vulnerability' that even ads don't even make money. Due to the epidemic of the new coronavirus infectious disease (COVID-19), many economic activities have stopped and the advertising budget of each company has decreased. But despite all this, Facebook's profits are rising due to the increased use of the platform.

This is because Facebook uses an automated advertising system. Advertising on Facebook is priced by supply and demand, and when some companies stop advertising, advertising costs will drop. ``A company that can not do business without Facebook'' sees such a situation as an opportunity and places many advertisements to steal customers from large conglomerates, so Facebook's advertising system can never fall into content shortage There is none. Therefore, even if a large company that previously advertised Facebook stopped advertising, Facebook revenue will not fall. As of June 2020, many

large companies are boycotting Facebook ads, but from a financial perspective, boycotts are not a big issue for Facebook.

On the other hand, the vulnerability of Facebook is Apple.

Facebook targeting ads are designed around the IDFA (Advertising Identifier) on the iPhone. However, Apple announced in iOS 14 scheduled to be released in the fall of 2020 that it will opt-in to whether users will be allowed to track IDFA to apps and websites. In other words, Facebook's automated targeting ads will have to undergo major changes. Thompson says Apple, which is expanding its app-installing advertising business, is technically clever about turning IDFA into a 'substantially useless one' without abolishing it.

To improve the user experience, Apple also blocks third-party cookies on Safari in addition to changing IDFA for privacy reasons. Apple's decision to consider privacy and disable IFDA is a business challenge for Facebook, while Thompson stresses that Apple's commitment to cookies on websites helps Facebook.

Many online shopping sites use third-party payment services, and so is Shopify, which is also known as the key to defeating Amazon . This makes it impossible for Shopify to make seamless payments by eliminating third-party cookies. Meanwhile, Facebook announced Facebook Shops in May 2020 that can open online shops on Facebook and Instagram, and Apple's third-party cookie elimination is more attractive to companies selling Facebook directly to consumers It is said to be something.

As evidenced by the above case, Thompson pointed out that Facebook and Apple appear to be facing the opposite direction in every way, and that there is actually a complex set of conflicts of interest. It is expected that the relationship between the two companies that will lead the industry while taking a completely different approach will continue.